Thursday, October 04, 2007

- RBC Capital is out with a surprising call on Gmarket (NASDAQ:GMKT) cutting their 3Q07 estimates below consensus to account for accentuated seasonality as their channel checks indicate that the holidays in Korea had a greater-than-anticipated impact on site activity. Korean Chuseok holiday (Sep. 25) fell midweek this year and lengthened the period of decreased online activity. RBC believes GMKT will report flattish GMV vs. 2Q07. They have lowered their estimates to GMV 775b KRW vs. prior 791b KRW, revenue $60mm vs. prior $62mm, and EPS $0.15 vs. prior $0.18. (Consensus stands at $0.18/ $62.7 mm).

That being said, firm's preliminary read into the level of activity heading into 4Q07 is indicating a sharp rebound and as a result FY07 estimates remain essentially unchanged. They believe investors should look past this period of seasonality and focus on what are actually indications for robust trends for 4Q07 and 2008. Maintains Outperform rating and $27 target.

Notablecalls: As I have stated in the past, I'm firmly bullish on GMKT. Yet, the stock is up over 30% over the past weeks, most likely on heels of the BIDU-induced run in stocks with Asian exposure. I think that at least some players will be unpleasantly surprised by RBC's comments regarding weakish Q3 and will be looking to pocket some of the recent gains.

I also think Baidu (NASDAQ:BIDU) will get hit today as we have Google crossing the wires today saying they are closing the gap with Baidu in China, after years of trying to increase market share in the world's second-largest Internet arena.

"We are closing up the gap with them (Baidu)," said Rebecca Kuei, Google's head of sales and business development for Taiwan and Hong Kong, declining to give specific figures.

Also note that HK stocks have just posted their biggest two-day drop in seven weeks.